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The
Canadian Border Services Agency announced Friday the final ‘safeguard’
surtaxes meant to shield the domestic steel industry from competition from
cheaper foreign imports of heavy plate and stainless steel wire.

Canada’s
steel producers had been hoping the federal government would protect its market
for other kinds of steel as well.

But
the Canadian International Trade Tribunal investigated the merits of
provisional safeguards placed on five other products earlier this winter and
reported it found
inadequate evidence to support claims that surges in foreign steel
imports posed a serious threat to the domestic industry.

“Canadian
steelworkers can count on this government,” Finance Minister Bill
Morneau said in the House of Commons last month after he confirmed that
the final safeguard surtaxes would be applied only to two kinds of steel.

The
federal government has started a 30-day
consultation period with the industry to figure out what other forms
of protection and support may be in order. “We are looking at multiple
measures that we think can be in support of the industry,” Morneau said.

Ottawa considers its options

Hamilton,
Ont. Liberal MP Bob Bratina said the government is trying to identify
measures that would “achieve the same thing” as the measures the
trade tribunal deemed unwarranted. “Can’t do it that way, we’ll find
another way,” he said.

Both
the Canadian Steel Producers Association (CSPA) and the United Steelworkers
union have warned that steel shipments displaced from the United States by its
25 per cent tariff on foreign steel could flood into Canada instead and
disrupt its market.

“That
steel is looking for a place to land,” said Catherine Cobden,
president of the CSPA. “Where does that surplus go? It will go to the
places that have no protection, no stabilizing mechanisms.

“The
job losses and investment not coming into this country will speak for
itself.”

The
Steelworkers union says that as a result of this recent market disruption, over
600 of its workers have been laid off — but some of the layoffs are
temporary.

Some
job reductions are at least partly attributable to the general slowdown in
Canada’s resource industry, including delays in pipeline projects
that require a lot of steel.

Steel
industry representatives also say they believe the Trump administration won’t
be willing to lift its “national security” tariffs on Canadian steel
and aluminum unless Canada extends an equivalent tariff wall around its
border — to prevent cheap steel from sneaking into the U.S. through
Canada’s back door.

Transshipment and tariffs

In
written responses to questions posed by the U.S. Senate Finance committee
recently, United States Trade Representative Robert Lighthizer said that
any “solution” that would lift the American tariffs would need to
“avoid import surges and prevent transshipment” (steel from other
countries transiting through Canada on its way to the U.S.), reduce
excess production in overseas markets and contribute to “increased
capacity utilization in the United States.”

The
new safeguard surtax order takes effect next Monday, May 13 and replaces the
provisional surtax placed on all seven steel products last October.

It
doesn’t apply to steel from the U.S., which is subject to separate retaliatory
tariffs in Canada. Several types of Mexican steel originally
were subjected to the provisional surtax, but Canada negotiated
an agreement with Mexico to exempt exports from this NAFTA
partner earlier this year.

The
final safeguards also don’t apply to steel from a set list of developing
countries, as well as other countries with whom Canada has trade
agreements: Chile, Colombia, Panama, Peru, the Republic of Korea
and Israel.

The
final safeguard surtaxes, like the provisional surtax, only kick in when
shipments of foreign steel exceed historical averages. They apply until October
2021 and ramp down slowly between now and then to give the industry
time to adjust.

For
each product, a tariff rate quota (a limit,
expressed in tonnes) is set for three periods — the first two lasting one
year, and the third lasting 165 days. The surtax will be added to
shipments above and beyond that quota.

For
heavy plate, the surtax starts at 20 per cent in the first year and decreases
first to 15 per cent and then ten per cent for the final 165 days.

For
stainless steel wire, the surtax rate starts at 25 per cent, then drops to 15
per cent after a year before falling to five per cent for the final period.

The case for killing surtaxes quickly

“The
sooner you end them, the less total pain you’re causing yourself,” said
Christine McDaniel, a former White House economic adviser, now a senior
research fellow with the Mercatus Center at George Mason University.

“The
longer they stay on, the harder it is to take them off, because the steel
industry gets dependent on these high prices, because they’re artificially
induced, not a price boost coming from real economic forces.”

McDaniel,
who has been analyzing the effects of U.S. steel and aluminum tariffs,
dismisses the idea that Canada’s safeguards (or lack of them) carry much weight
in Washington’s decision-making on steel tariffs. There are longstanding processes
in place to prevent the dumping of unfairly-traded steel, she noted.

The
steel producers, she said, “have a louder voice” in the current
political climate and are using the opportunity to get all the protection
they can.

If
the Americans really were worried about transshipments, she said, the
two countries’ customs authorities could figure out a way to verify the true
origin of steel entering the U.S.

Steelworkers call for ‘strong message’

That’s
not how the United Steelworkers union sees it.

“Unless
Canada’s prepared to send a strong message to the White House that we’re
prepared to protect our steel markets, we’re not going to be able to persuade
the U.S. to lift those … tariffs,” spokesperson Mark Rowlinson said on
CBC News Network’s Power & Politics last month.

“We’ve
heard stories of literally ships full of tonnes and tonnes of rebar, coming
across both oceans, the Atlantic and the Pacific, looking for warehouses in
Canada.”

But
trade lawyers dispute the likelihood of this happening, pointing to the
evidence the tribunal heard and considered before coming to its recommendation
for Morneau.

“Canada
has 46 anti-dumping orders against steel products from 23 countries,”
said Jim McIlroy, who argued on behalf of clients at the tribunal’s
hearings in January that Canada should not continue the safeguards.
“It’s not as if there’s a whole lot of steel whizzing around coming into
Canada that is not subject to dumping duties.

“Canada’s
regime is very effective at blocking unfairly-traded goods from entering the
Canadian market.”